Xperience Restaurant Group CEO Randy Sharpe knows he might be in the minority these days. It isn’t giving him pause. In a dining world defined by everything COVID-19 has changed, Sharpe believes customers yearn for the experience they remember.
“I’m one person and we’re one company, and there’s a lot of different opinions of how to approach the restart and get through the pandemic,” he says. “But we didn’t change our brand. We didn’t scale back our menu. We actually looked for ways to provide a better experience and more of an experience to the guest when we were able to welcome them back.”
This wasn’t the effortless path for XRG, and it surely wasn’t the cheapest. Yet it’s the reason Sharpe believes the company’s 60 locations and nine brands bounced back from early craters better than most, and why it’s positioned to win long-term.
Sharpe, who joined XRG from Macaroni Grill in 2018 after Z Capital bought Real Mex out of bankruptcy for $47 million and rebranded it, shares a story that’s guided him in recent months. When restaurants began to reopen, Sharpe went to dinner with his family at a competitor. His wife missed the venue. But mainly, she missed a specific menu item she couldn’t recreate.
It wasn’t there anymore. “And then that emotion sets in,” Sharpe says.
Restaurants have an unenviable task. There’s no real other way to slice it. How do you keep customers and guests safe and yet not constantly remind them they’re eating out during a pandemic?
If dining is an escape from quarantine behavior, can you suspend reality and also reassure people their personal safety isn’t at risk?
According to Datassential, nearly 90 percent of consumers (88) said they’d support “requiring customers to maintain 6 feet or more of social distance” as a safety precaution.
It went as follows after:
- Requiring customers to sanitize their hands upon entering: 87 percent
- Requiring customers at the bar area to have a seat; no standing: 83 percent
- Reserving hours for vulnerable customers (seniors, etc.) to dine in: 82 percent
- Having a staff member/bouncer enforcing capacity at the door: 81 percent
- Taking customers’ temperatures before they enter the restaurant: 78 percent
- Requiring customers to wear masks when they’re not eating or drinking: 75 percent
- Requiring customers to wait outside if they’re waiting for a table: 71 percent
- Requiring pickup/takeout customers to wait outside: 70 percent
- Not allowing large groups to sit together: 69 percent
- Enforcing takeout/carryout only; no indoor seating/dining: 67 percent
- Seating customers by reservation only: 63 percent
- Getting rid of physical menus: 60 percent
- Requiring customers to show proof of wellness: 55 percent
- Not accepting cash payments; digital / contactless payment only: 53 percent
- Seating only customers that have pre-ordered food ahead of time: 48 percent
On the actual sanitation topic, the new table stakes for on-premises dining appear to center on spaced out tables and counters wiped down each turn.
Percentage of consumers indication each option is a “requirement.”
- Regularly/visibly wiping down tables, kiosks, other things people touch: 81 percent
- Employees wearing food safety gear (masks, gloves, hairnets, etc.): 78 percent
- Adding more food covers, sneeze guards, enclosed cold cases, etc.: 70 percent
- Adding more space between tables/eliminating communal seating: 67 percent
- Providing disinfectant wipes for me to use: 58 percent
- No open containers of food: 55 percent
- Visibly posting results/grades from food safety inspections: 54 percent
- Enabling mobile ordering/contactless payment: 45 percent
- Serving everything individually wrapped: 42 percent
- Propping open doors so customers don’t have to touch door handles: 40 percent
If you look at the dichotomy from top to bottom, it’s clear guests want to enter a bubble of sorts. Do what’s needed to get in and be safe, but don’t change everything about the dining experience as we once knew it.
For instance, people appear far more concerned about who else is in the restaurant, and how close they are, than if the menu is disposable. Or if the table was cleaned after the last party versus if the silverware can be thrown out each time.
When asked who they trust, only 14 percent said they “trust completely” other diners in a restaurant. It was 38 percent for “my own dining companions.”
“There’s safety protocols for a reason. You’ve got to be responsible,” Sharpe says. “And it starts with your team and the guest who actually chooses you. But there is a way to apply safety protocols and have a great experience.”
XRG is known for its brunch service across many of its brands. It runs Acapulco, Chevys Fresh Mex, El Torito, El Torito Grill, Las Brisas, Who Song and Larry’s, Sinigual, SOL Cocina, and Solita.
Some of the upscale concepts historically offered plated brunch. Others, like El Torito and Acapulco, were known for extravagant buffets, and have been for decades. The variety was the draw. Customers brought their entire families and made a day of it.
When COVID hit and regulations flooded in, this would have been an easy spot to open the pandemic excuse valve and save some capital.
XRG did the opposite. It reconfigured the setup, erected plexiglass, and put attendants behind the barrier at each station to guide diners through the entire process.
“That’s the perfect example of taking a daypart that you could have easily said, ‘hey, this is a lot of work to keep this in play. Maybe we don’t do that, save a little money.’ And I think that would have been a mistake,” Sharpe says.
Instead, XRG treated guests to an experience they clamored for, and felt it was worth leaving the house to get. The extra effort, Sharpe says, showed XRG appreciated the loyalty.
It did the same with Taco Tuesdays. Pre-virus, XRG would lay out a massive spread and people could buy tacos from servers and get to building. Now, the company has two employees leading customers along. “We spent a little more on labor betting on the fact that our guests would appreciate it, and they did,” Sharpe says.
Additionally, XRG didn’t pare down any of its menus. It’s even kept up the chef’s special quarterly program it’s always used to introduce new items or bring back past favorites.
“They still have their brands,” Sharpe says. “The brands they’ve grown up with, that are loved, that they’ve been around. Brunch. Taco Tuesday. Things they can count on.”
“If we have to make some changes and it’s a little more expensive, in the long run guests will appreciate it and they’ll come back and we’ll win on volume,” he adds.
Sharpe sees it this way. In our daily lives, COVID isn’t just the invisible enemy. It’s affecting everything even when we can’t connect the dots. Why is the dry cleaner late? How long will it take to ship a package?
Restaurants can fall into this habit or they can navigate around it, he says. “I say this to my team all the time: Leaders solve problems. They don’t make excuses. I really believe that. … We have solved problems. Guests are counting on us to. The last thing anyone wants to hear when you go out to eat at one of our restaurants or any restaurant is, we can’t do that because of COVID.”
Sharpe has held firm to this north star during some challenging turns. Roughly 90 percent of XRG’s business in California. The same percentage is in casual dining.
The company was down as much as 90 percent in sales early on when the on-premises game went dark. It clawed its way back to 65 percent or so of prior-year business before outdoor dining and other options progressed the system to single-digit declines in early February.
Naturally, it’s been a twisted experience since tied to California’s regulatory flip-flops, including an outdoor dining ban that took effect in early December and waged in the courts.
Sharpe says XRG spent significant capital trying to ensure it had sufficient outdoor space, something it saw coming over the summer. And it led to strong results. XRG was actually up in sales in August, September, and October over 2019 levels. It then had to pivot again with the December change and try to survive a strange, eight-week stretch.
But it’s essentially back across the system and XRG has returned to “full strength,” meaning California units at least have outdoor options and the balance of the company’s Midwest and East Coast stores boast some combination. Right around Valentine’s Day is when XRG started to make noise again, Sharpe says.
“I think we have a better chance here than most and I think that the key to success, again, is exactly what we did in July [with the outdoor patios]. Just be ready. Be staffed,” Sharpe says. “Make sure your space is inviting to your guest while maintaining all the protocols.”
The labor part has been critical. XRG brought back more than 90 percent of its temporarily furloughed employee base and hired additional workers to ensure each restaurant was fully staffed, trained, and ready to go when mandates allowed for it. The company didn’t close a single restaurant or take on new debt during the pandemic. It also ensured field ops teams and managers all received bonuses, whether stores hit typical metrics or not.
Not one manager was let go in the past year. This was key not only because it helped XRG operate skeleton takeout and carryout-only crews when needed, but also because it kept active lines to hourly employees open. These same managers are the ones who reached back out when the time to reopen began and staffing levels needed to rise.
“It’s a long-term look of how to solve a problem versus how do we look today,” Sharpe says. “Not that it wasn’t nerve wracking the entire time—it was. But I think it was the right thing to do.”
While XRG didn’t slice its menu, it did look to fill some gaps. Namely, the sudden hole between large-group catering and individual orders that emerged out of lock-down behavior. The answer for XRG, as it was for many chains during COVID hoping to reach “small gatherings,” was to create family value packs and alcohol to-go programs. It flipped to Olo for online ordering and made sure its off-premises experience wasn’t simply the only option left, but one that was as frictionless and close to XRG’s dine-in standards as possible.
That started with packaging and moved to the ecommerce platform switch.
Off-premises represented about 10 percent of XRG’s business pre-pandemic. It obviously leapt to 100 percent at one point. Sharpe believes it will “probably land” around 20 percent.
“There will be a group of people who, for very good reason, are not going to choose to come into full-serve restaurants right now and for the near future, maybe the next year, year and a half,” Sharpe says. “I think they’re deserve the same opportunity to have a great experience like everyone else does.”
And as that digital business sticks somewhat, XRG’s outdoor investments will, too, Sharpe says. He calls it’s “probably the biggest reason” the company was able to come back so quickly.
Amid all the uncertainty, and despite California’s ban, most agree dining out is safe. If not entirely so, more so than going inside.
So it will likely serve as a bridge for those warier consumer groups tip-toing back into the world.
However, just because it’s a comfort zone doesn’t mean XRG tossed a few card tables outside and erected some folding chairs. Sharpe says that path is a quick way to inspire trial but fall flat with repeat business. “You might get them once, but you’re not going to get them back,” he says. “It’s not the experience they’re looking for.”
City regulations and approval dictated XRG’s outdoor plans a bit. The goal, though, generally, was to keep whatever new facilities they invested in for the long run. Call it a year-long target to start.
XRG did nine permanent patios “for a fairly significant investment.” In those stores, the changes will be around as long as the restaurant is.
Others, like parking lots, will naturally go away in time. XRG didn’t want to make that obvious to the guest, however. It forked up funds for details like turf, canopies, and umbrellas. In some stores with nice views, the vision was “the nicest wedding somebody’s ever been to outdoors.”
“We wanted to make it a great environment,” Sharpe says. “We were doing this before July of last year. We had a feeling there was a good chance, based on what we were seeing in other states, that outdoor dining was going to be a mainstay for a while. We created this template, we created a vision, we pictured it, we decked it out, and we had our facilities cost out everything. And then we just started going around, once we got approval, getting them set up. And it was expensive.”
Costly, but worth it. One place XRG was able to grab share, Sharpe says, is by making its outdoor dining feel like, well, not like eating in a parking lot. Heating. Protection from the elements. “You have to create it,” Sharpe says.
In 2020, XRG acquired two Chevys Fresh Mex franchise locations and oversaw the development and opening of a new Pink Taco in Miami. It also successfully integrated Sol Cocina and Solita, two brands it acquired in November 2019 for an undisclosed amount. SOL Mexican Cocina, founded about a decade ago, boasted a menu from James Beard-nominated cookbook author Deborah Schneider, who is also a co-founder. Solita is the brand’s more casual take.
Sharpe is optimistic about 2021 and beyond for XRG’s full portfolio. He thinks the worst is behind us, in terms of COVID restrictions.
“I think we’ve all learned a lot,” he says. “I think the safety protocols that the health department and everyone has collaborated and put together are great. I think it’s not just the pandemic, it’s the fact that we’ve brought the industry—we’ve brought safety to top of mind, again.”